In January 2009 i purchased a website and took over the publishing account from old website owner. I changed all the log in info and all the account information to my name. In the end of Fabruary 2009 they suspended my publisher account and took over all my earnings. Almost 4000$ worth. Now i got a 1099 form in the mail and they have reported to IRS that i have received all the money from them but i didn't get e single penny. Could someone please advice me on how to deal with this issue ? should i call IRS and explain what is going on ? Is there anywhere i can complain about this issue ? I am trying to do my taxes but if i don't report what adbrite claims that they payed me i am afraid that i would be in big trouble.
What you are asking is a little unclear. How can adbrite take money from you? Did they pay you, then you gave the money back? Or did they just not pay you? If you allowed them to take the money back, why? If they never paid you but still sent a 1099, you have 2 options. 1)If you have proof that they took the money back, then you report this as a misc. expense. In other words, the expense cancels out the money and it's a wash. You are taxed on profits. Still report the 1099. If not, the IRS will get you. Or: 2)Fill out Form 4598 available through IRS. Stephen C
You are an idiot for using his publisher account you should have created one yourself. Simply don't file the 1099 contact the old website owner, and AdBrite tell them the situation again. If they don't listen contact the IRS -- if adbrite doesn't correct the issue it is against the law and they can be heavily fined.
I would file my taxes normally and not include the figures from the errant 1099 form when calculating everything. I would however include a copy of the errant 1099 form and an explanation that I never received the income claimed on the errant form along with my concern about not wanting to be audited for not reporting it. This shifts the burden of proof on to the entity who issues the 1099 form. If they can not produce any records of a check being cashed, an electronic funds transfer happening, or another traceable form of payment then legally the income doesn't exist. I would also contact the issuer of the 1099 form and let them know there is a possible bug in their system that is causing 1099 forms to be issued on accounts that were never paid. This could potentially be a huge accounting error and cause them to get audited if they don't catch it before they file. They'll be happy to listen. There's also the possibility that they're just not keeping records of who was in control of the account and when, meaning they should have sent the form to the person who was previously named on the account.
I would call a local registered agent and ask them what to do. I wouldn't rely on anonymous replies here for a situation with the IRS.